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Value Based Management: The Corporate Response to the Shareholder Revolution

Companies that either diminish firm value or destroy it far outnumber Wall Street's wealth-creating superstars-and investors hate it. To respond to growing pressures to put shareholder value creation at the top of the agenda, today's leaders are increasingly turning to a powerful set of tools for value based management.The corporate world's most... more » significant and effective response to the shareholder revolt, value based management (VBM) allows financial managers to plan, monitor, and control a firm's operations in ways that enhance shareholder value. This timely book-based on the authors' research and on an extensive study of firms that have successfully implemented VBM systems-provides the first objective, field-tested synthesis of the most popular models in use today: the free cash flow method, the economic value added/market value added (EVA/MVA) method, and the cash flow return on investment approach (CFROI). Pointing to the lessons learned by VBM adopters in a wide variety of industries, the authors outline the advantages and disadvantages of each model, and guide managers in electing, implementing, and operating one that best fits their organization. At its essence, value based management involves transforming behavior in a way that encourages employees to think and act like owners. Laying the foundation for building a capital-market-focused measurement and reward system that ties employee-level performance to owner-level rewards, this book will help today's leaders establish a continuous cycle of value creation that benefits all stakeholders of a company.

John D. Martin is Professor of Finance and the Carr P. Collins Chair of Finance at the Hankamer School of Business, Baylor University. J. William Petty is Professor of Finance and the W.W. Caruth Chair of Entrepreneurship at the Hankamer School of Business, Baylor University.

Value Based Management is part of the Financial Management Association Survey and Synthesis Series.